Strategy saved from Index expulsion, yet a hidden clause effectively kills the infinite money loop for investors
The menace of a large pressured sell-off in crypto-linked equities has been averted.
However, that reprieve comes with a structural catch that essentially alters the economics of the “Bitcoin Treasury” commerce.
On Jan. 6, the dominant benchmark supplier for international fairness and ETF markets, MSCI Inc., announced it would retain “Digital Asset Treasury Companies” (DATCOs) in its international indices for the February 2026 overview, sparing companies like Strategy (formerly MicroStrategy) from expulsion.
It said:
“For the time being, the present index therapy of DATCOs recognized in the preliminary record printed by MSCI of firms whose digital asset holdings characterize 50% or extra of their complete belongings will stay unchanged.”
Following the information, Michael Saylor, Strategy’s govt chairman, touted the victory of remaining in the benchmark.
However, the index supplier has concurrently launched a technical freeze on share counts for these entities. It defined:
“MSCI is not going to implement will increase to the Number of Shares (NOS), Foreign Inclusion Factor (FIF) or Domestic Inclusion Factor (DIF) for these securities. MSCI will defer any additions or size-segment migrations for all securities included in the preliminary record.”
Through this determination, MSCI has effectively severed the hyperlink between new fairness issuance and computerized passive shopping for.
This transfer merely meant the “draw back” of a pressured liquidation has been eliminated, however the “upside” mechanics of the index commerce have been dismantled
The finish of the mechanical bid
The quick market response, a surge of over 6% in Strategy’s inventory, mirrored aid that a catastrophic liquidity occasion was off the desk.
Notably, JPMorgan advised that a full exclusion might have triggered between $3 billion and $9 billion in passive selling of MSTR.
This quantity would seemingly have crushed the inventory worth and compelled the liquidation of Bitcoin holdings.
However, the eliminated menace of exclusion masks a new actuality the place the computerized demand lever for the shares is gone.
Historically, when Strategy issued new shares to fund Bitcoin acquisitions, the index supplier would finally replace the share rely.
As a end result, passive funds monitoring the index have been then mathematically compelled to purchase a professional rata portion of the new issuance to attenuate monitoring error. This created a assured, price-insensitive supply of demand that helped soak up dilution.
Under the new “freeze” coverage, this loop is damaged. Even if Strategy considerably expands its float to boost capital, MSCI will effectively ignore these new shares for index calculation functions.
The firm’s weight in the index is not going to improve, and consequently, ETFs and index funds is not going to be pressured to purchase the new paper.
Market analysts word that this shift forces a return to fundamentals. Without the backstop of benchmark-tracking demand, Strategy and its friends should now depend on energetic managers, hedge funds, and retail investors to soak up new provide.
Quantifying the liquidity hole
To perceive the magnitude of this shift, market researchers are modeling the “misplaced bid” that issuers should now navigate.
Bull Theory, a crypto analysis agency, quantified this liquidity hole in a word to shoppers. The agency posited a hypothetical situation involving a treasury firm with 200 million excellent shares, of which roughly 10% are sometimes held by passive index trackers.
In the Bull Theory mannequin, if that firm points 20 million new shares to boost capital, the previous index mechanics would finally mandate that passive funds buy 2 million of these shares.
At a theoretical worth level of $300 per share, that represents $600 million of computerized, price-insensitive shopping for strain.
Under MSCI’s new freeze, Bull Theory famous that the $600 million bid falls to zero.
Considering this, it said:
“Strategy now should discover non-public consumers, supply reductions, or elevate much less money.”
This implies that the pressured demand from index funds has been eradicated.
Thus, it presents a significant hurdle for Strategy, which issued greater than $15 billion in new shares throughout 2025 to aggressively accumulate Bitcoin.
If the firm makes an attempt to duplicate that scale of issuance in 2026, it would accomplish that in a market void of passive help. Without that structural bid, the danger of a worth correction throughout dilution occasions will increase considerably.
ETFs emerge as silent winners
MSCI’s determination to cap these firms relatively than expel them or go away them alone has additionally considerably altered the aggressive dynamics in the asset administration sector.
Over the previous 12 months, US spot Bitcoin ETFs have matured as an asset class and have seen vital institutional curiosity. In reality, this rise led MSCI’s former mum or dad firm, Morgan Stanley, to file for its personal Spot Bitcoin ETF.
From this vantage level, Strategy competes with these fee-bearing Bitcoin ETFs, providing investors a solution to acquire passive Bitcoin publicity by way of an working firm construction. By freezing the index weighting of DATCOs, the new rule degrades their potential to effectively scale by way of fairness markets.
If Strategy’s potential to boost low-cost capital is curtailed, massive allocators might rotate capital out of the company fairness and into Spot ETFs, which don’t carry the operational dangers of a firm or the premium-to-NAV volatility.
This circulate of funds would straight profit issuers of spot ETFs, including major Wall Street banks, effectively capturing the charges beforehand mirrored in fairness premiums.
By neutering the “flywheel” impact of the treasury technique, the index supplier might have inadvertently, or deliberately, leveled the taking part in discipline in favor of conventional asset administration merchandise.
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